The Promise and Pitfalls of 5G: Will It Kill Cable?

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Wharton’s Kevin Werbach and Jeffrey Reed from Virginia Tech discuss whether 5G technology will live up to its promise.

In December, the Federal Communications Commission will undertake the largest spectrum auction in U.S. history — putting 3.4 GHz of airwaves on the market to free up space for 5G communications. As the next generation in wireless technology, 5G promises to boost data speeds by up to 100 times, making them competitive with the fastest wired broadband networks. In April, the White House planted an official stake in the 5G race, with President Trump calling it a “big deal,” as it will change the way Americans work, learn, communicate and travel.

A lot of expectations are riding on 5G, for good reason. The technology offers “potentially gigabyte speeds over wireless, fast enough that for the first time wireless could be a competitive alternative for wired systems — like cable- and phone-based and fiber-based systems — for basic broadband access,” said Kevin Werbach, a Wharton professor of legal studies and business ethics who used to work for the FCC, on the Knowledge@Wharton radio show on SiriusXM.

5G also could usher in new innovations to supercharge the “internet of things” and mobile broadband applications, among others. “It is very important for the U.S. to adopt this technology early. And the reason is that it is going to form the basis for innovations in a variety of areas, such as smart grid and smart connected automobiles, and factories of the future,” said Jeffrey Reed, Virginia Tech professor of electrical and computer engineering and founding director of Wireless@Virginia Tech. (Reed joined Werbach on the Knowledge@Wharton show. Listen to the podcast above.)

Case in point are past rollouts of 2G, 3G and 4G networks, which led to new applications like livestreaming after fully deploying. “My gut feeling is there are probably 5G applications that we will eventually have that we are not even thinking about today,” Reed said. Due to 5G’s reliability and low latency or delay, new future applications could include “being able to control, for instance, unmanned aerial vehicles, cars talking with other cars, and cars talking with people to avoid collisions. [Also,] cars planning a strategy together on how to deal with a traffic situation.”

“It is very important for the U.S. to adopt this technology early. And the reason is that it is going to form the basis for innovations in a variety of areas….” –Jeffrey Reed

A potential killer app for 5G is augmented reality (AR), Reed added. That means “being able to superimpose on your field of view augmentation that may explain the things around you,” he said. “That could have a very dramatic effect, impacting everything from tourism to education.” 5G can supercharge AR and virtual reality by placing “virtual items, virtual characters and augmented contextual information” in TV shows and movies or even projecting 3D holographic displays, according to the “5G and the Economics of Entertainment” report by Intel and Ovum.

But the cold reality is that a fully functioning 5G future still is a long ways away. “5G is called 5G because it is the fifth generation of wireless technology and so, obviously, there were four prior generations,” Werbach said. “These are things that evolve and develop and get implemented over a long period of time. They involve extensive standards work in the industry; they involve extensive deployment work.” Even the FCC’s plans took time. “All of these spectrum auctions for the high frequency spectrum to be used for 5G have been in the works for a long time,” he said.

What Is 5G?

5G is a wireless communications technology that is a big step up in connectivity — some describe it as a quantum leap — from 4G. It can use any band of spectrum but thrives in the extremely high frequency (EHF) range of 30 to 300 GHz, compared to today’s cellphones that are in much lower bands. “When you’re transmitting and receiving at very high frequencies, it is very efficient for carrying lots and lots of data,” said Gerald Faulhaber, Wharton professor emeritus of business economics and public policy and former FCC chief economist. “You can carry much, much more data than you ever could using our 4G phones.”

But a key drawback is that these signals travel only short distances. The wavelengths in this band range from 1 mm to 10 mm — the FCC’s December auction is called the millimeter wavelength auction — so these can’t reach very far and are easily degraded. “Very high frequency radio signals travel in direct, straight lines, and they attenuate very quickly,” Faulhaber said. In comparison, very low frequency 30 hertz signals can travel more than 10,000 km, or 6,200 miles. Lower frequencies also can better penetrate solid objects like buildings and walls.

Because millimeter wavelengths are short, they need more antennas to connect. “One of the things that 5G requires is a much denser network,” Werbach said. “You need many more nodes. That is partly how the capacity increases, which means either more towers or more cells in more places. You need equipment that is running on those cell sites, and then you need chips that go into people’s handsets and devices.” At least, the 5G antennas are small and can be installed easily on top of telephone poles and other locations, Faulhaber said.

Because it requires density, 5G mainly is feasible for more populated areas where many antennas can be placed close together. “The nature of the infrastructure is that it works in dense areas; it doesn’t work as well in other areas,” Faulhaber said. “Will there be 5G in [rural areas]? The answer is yes, but it won’t be over these high-frequency antennas. It will be basically where 4G is today, so you won’t get the high-capacity [service].”

“There are still too many Americans who don’t have broadband service and many more who have inferior quality broadband service.” –Kevin Werbach

This brings another challenge: the widening of the digital divide by geography. “It is a real problem,” Werbach said. “There are still too many Americans who don’t have broadband service and many more who have inferior quality broadband service.” The reality is it’s “harder and more expensive to provide wireless service and wireline service in rural and hard-to-reach areas.” While the FCC has set aside $20 billion to expand broadband access in rural areas, he said, the commission was short on details and where the funds would actually come from.

Telecom Investments

Telecom companies and other providers will have to invest billions to make 5G a reality — not only to buy more spectrum, but also to build out the infrastructure. Because it’s yet uncertain how much revenue 5G will bring, for now the most prudent path for telecom firms is to upgrade the capacity of their 4G networks by reclaiming airwaves allocated for 2G and 3G, as well as buying more spectrum, according to a report by McKinsey. (The lower bands can be used for 5G as part of the carrier’s network management plan, even though data capacity won’t be as good.)

But there will come a time when these tactics won’t be enough. Historically, data traffic rises by 20% to 50% a year, and 5G could put the traffic increases at the higher end of that range, the McKinsey report said. That means most telecom companies will have to embark on a “significant new build out” between 2020 and 2025. Also, to handle higher traffic, carriers have to install fiber in their wired networks, where wireless connects to the internet. “It’s rather ironic that the projected performance goals of 5G wireless will depend on the availability of wireline fiber,” an executive at telecom equipment maker Ciena said.

At least, 5G standards have been finalized by the 3GPP, an international group whose members work together to develop cellular standards. These are standards that networks must meet to be considered 5G. Carriers can’t just label their service 5G, which is a lesson AT&T learned when it was sued by Sprint for putting “5GE” on its service despite not using true 5G. AT&T reportedly settled the lawsuit, explaining that “E” stands for “Evolution.” A Verizon spokesman tweeted that “5GE” stood for “5G Eventually.”

5G ‘Hype’ and China’s Huawei

Telecom carriers have been trialing 5G. In April, AT&T said mobile 5G is live in parts of 19 cities, with more cities to come. In the same month, Verizon said 5G service has launched in parts of Chicago and Minneapolis, where typical early adopters experience download speeds of 450 Mbps and peak speeds of 1 Gbps. That is six and 14 times faster than the median fixed broadband speed of 72 Mbps respectively, according to a December 2018 FCC report. Verizon expects to deploy limited 5G in more than 30 cities this year. Last fall, it launched a limited 5G home internet service in four cities. Sprint is rolling out 5G in nine markets this year.

“Will there be 5G in [rural areas]? The answer is yes, but it won’t be over these high-frequency antennas. It will be basically where 4G is today.” –Gerald Faulhaber

But T-Mobile is calling out its rivals over their 5G hype. “I have the exact same 5G mmWave network equipment and software that AT&T and Verizon do, and there’s no way we would launch this for customers right now,” CTO Neville Ray wrote in a blog. The millimeter wave signal “doesn’t travel far from the cell site and doesn’t penetrate materials at all,” he said. Ray’s blog even embedded a moving image showing that millimeter waves can’t even go through a door. T-Mobile will bring 5G to market, he said, “when the technology is ready for everyday customer use.”

Telecom analyst Craig Moffett of MoffettNathanson echoed similar doubts on CNBC. “There’s zero chance that 5G is ubiquitous technology” by 2021, he said. “The promises around 5G being insanely fast are partly because the standards for 5G were set for insanely wide blocks of spectrum. But you can’t find insanely wide blocks of spectrum anywhere except in these kind of stratospherically high frequencies,” which has its own technical problems. He noted that China, which is surging ahead on 5G, doesn’t use millimeter wave but rather lower band spectrum below 6 GHz, while Europe is using a combination of the two.

Politics also influences U.S. carrier adoption of 5G. The government has security concerns about using 5G telecom equipment from China’s Huawei because of fears over spying. Huawei is the world’s largest maker of telecom equipment, including that needed for 5G. It became a colossus, and “a key reason for that is they produce very inexpensive equipment. It is much cheaper than [that of] their European competition,” Reed said. Huawei doesn’t have any U.S. competition, because infrastructure providers left the business about 20 years ago, he added.

Today, Europe and other parts of the world are customers of Huawei. Britain and Germany specifically are resisting pressure from the U.S. to stop using Huawei. Their carriers have used Huawei in their networks for years, so “for them, it is very difficult to say … ‘rip it all out and go find someone else,’” Werbach said. “They’re just not going to do it.” Added Reed: “Even though a security threat exists with Huawei, companies tend to look the other way to maximize profits, lower costs.” As for security, “that’s way down on their list,” Reed said.

Werbach explained that the U.S. can’t address these security concerns by merely saying it will not use this equipment. It has to be more proactive. “We need to invest in companies in the U.S. and bring trust around the world that, for example, the U.S. is not putting similar kinds of back doors into equipment made by U.S.-based service providers.”

“Even though a security threat exists with Huawei, companies tend to look the other way to maximize profits, lower costs.” — Jeffrey Reed

Will 5G Replace Cable?

Even with 5G’s drawbacks, enthusiasm for it remains unabated. One big hope is that 5G could be a viable alternative to the wired broadband service provided by cable and telecom companies. “Could 5G … be the new single pipe into the home?” Faulhaber asked. But before one gets excited about competition bringing lower prices and better service, remember that the same companies currently providing wired broadband to the home are the ones launching 5G. “Guess who are the two dominant wireless operators that have … a big chunk of the spectrum in the service? AT&T and Verizon, who, of course, are also major wired broadband providers,” Werbach noted.

However, Werbach acknowledged that there potentially could be other players in 5G, such as T-Mobile, Sprint and Comcast. Indeed, T-Mobile and Sprint have been trying to convince regulators to let them merge because then they would have the heft to deploy 5G nationally. But The Wall Street Journal reported in April that the deal is unlikely to be approved as structured.

As for Comcast, Faulhaber pointed out that the cable giant already has installed plenty of Wi-Fi receivers, including in customers’ routers that other folks on its network can use to access the internet. “Xfinity Wi-Fi is all over the place and I would suspect we would see something like that with 5G,” he said. But Faulhaber also pointed out that Comcast has time to figure out a response to 5G since it won’t have to worry about competition from this new technology in the near future.

Comcast CFO Michael Cavanaugh put it this way at a recent conference: “The threat of 5G to our broadband business is not significant any time soon. That’s because [cable is] going to be the most economic way to deliver high-quality broadband, period.” Any cable rival will need “high capacity, high speed and … high reliability,” he said. “Between the different ways, different levels of spectrum and approaches to 5G, it’s really hard to see how there’s a path to any one of those being a broadly addressable solution for residential [broadband] in the U.S.”

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"The Promise and Pitfalls of 5G: Will It Kill Cable?." Knowledge@Wharton. The Wharton School, University of Pennsylvania, 29 April, 2019. Web. 25 May, 2019 <https://knowledge.wharton.upenn.edu/article/the-push-for-5g/>

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